10-08-2020 , 06:48 AM
https://www.hollywoodreporter.com/news/n...uous-cycle Netflix Analyst Boosts Stock Price Target to Street High $650, Touts "Virtuous Cycle"
5:17 AM PDT 10/7/2020 by Georg Szalai
Whatever subscriber and other trends may be near-term, the company "is likely to remain as the dominant global SVOD player for the foreseeable future," says Pivotal's Jeff Wlodarczak.
Pivotal Research Group's Jeff Wlodarczak now has the highest price target among Wall Street analysts on the stock of streaming giant Netflix, boosting his by $50 to $650 in a Wednesday report.
He said the increase is "primarily" driven by focusing on a year-end 2021 rather than a 2020 target given the year is nearly over.
"While clearly in the first half of 2020, Netflix benefited massively from global COVID-19 stay-at-home orders (highlighted by first-half net subscriber additions rising 110 percent year-over-year to nearly 26 million), our view remains that the unfortunate COVID-19 situation simply accelerated trends already in place (pay TV declines with SVOD benefiting), and Netflix is likely to remain as the dominant global SVOD player for the foreseeable future," Wlodarczak explained.
Ahead of the company's third-quarter earnings report, Wall Street has been debating its subscriber momentum, including the potential impact from a controversy surrounding original film Cuties, which the Pivotal analyst didn't discuss in his report.
"On the surface, 2.5 million (minus around 60 percent year-over-year) net new subscriber guidance appears reasonable given potential churn from the strong first half as economies open up somewhat and comping very strong third-quarter 2019 programming slate and launch of Peacock and to a lesser extent HBO Max and the return of sports," he argued though. "However, while it could temporarily effect the stock, our thesis on Netflix would remain unchanged even if they were to report a flat quarterly subscriber result, which we are not calling for, given the massive beat in the first half, the difficulty of forecasting the third quarter and the aforementioned favorable broad SVOD trends."
Netflix will report its latest subscriber and financial results after the stock market close on Oct. 20.
Whatever the figures, Wlodarczak sees the wind blowing into the steamer's sails longer-term. "The company appears to operate in a virtuous cycle, as the larger their subscriber base grows (and their average revenue per user increases) the more they can spend on original content, which increases the potential target market for their service and reduces existing subscriber churn," he concluded.
The Wall Street observer also addressed the success of Walt Disney streaming service Disney+, calling it "complementary to Netflix product as it appears focused mainly on children under 13 and is likely to exacerbate the swap from an increasingly disappointing traditional pay TV service."
5:17 AM PDT 10/7/2020 by Georg Szalai
Whatever subscriber and other trends may be near-term, the company "is likely to remain as the dominant global SVOD player for the foreseeable future," says Pivotal's Jeff Wlodarczak.
Pivotal Research Group's Jeff Wlodarczak now has the highest price target among Wall Street analysts on the stock of streaming giant Netflix, boosting his by $50 to $650 in a Wednesday report.
He said the increase is "primarily" driven by focusing on a year-end 2021 rather than a 2020 target given the year is nearly over.
"While clearly in the first half of 2020, Netflix benefited massively from global COVID-19 stay-at-home orders (highlighted by first-half net subscriber additions rising 110 percent year-over-year to nearly 26 million), our view remains that the unfortunate COVID-19 situation simply accelerated trends already in place (pay TV declines with SVOD benefiting), and Netflix is likely to remain as the dominant global SVOD player for the foreseeable future," Wlodarczak explained.
Ahead of the company's third-quarter earnings report, Wall Street has been debating its subscriber momentum, including the potential impact from a controversy surrounding original film Cuties, which the Pivotal analyst didn't discuss in his report.
"On the surface, 2.5 million (minus around 60 percent year-over-year) net new subscriber guidance appears reasonable given potential churn from the strong first half as economies open up somewhat and comping very strong third-quarter 2019 programming slate and launch of Peacock and to a lesser extent HBO Max and the return of sports," he argued though. "However, while it could temporarily effect the stock, our thesis on Netflix would remain unchanged even if they were to report a flat quarterly subscriber result, which we are not calling for, given the massive beat in the first half, the difficulty of forecasting the third quarter and the aforementioned favorable broad SVOD trends."
Netflix will report its latest subscriber and financial results after the stock market close on Oct. 20.
Whatever the figures, Wlodarczak sees the wind blowing into the steamer's sails longer-term. "The company appears to operate in a virtuous cycle, as the larger their subscriber base grows (and their average revenue per user increases) the more they can spend on original content, which increases the potential target market for their service and reduces existing subscriber churn," he concluded.
The Wall Street observer also addressed the success of Walt Disney streaming service Disney+, calling it "complementary to Netflix product as it appears focused mainly on children under 13 and is likely to exacerbate the swap from an increasingly disappointing traditional pay TV service."
